Transcript Midterm: Mean=45/55

Midterm: Mean=45/55
40+ fine
30+ a little worried
Under 30: Nobody
American Legal System?
• Suggestions Welcome
• What should I tell non-lawyers that I
don’t?
• What do I say that isn’t true?
Next Chunk of the Course
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Property
Intellectual Property
Contract
Family Law
Tort
Crime
Antitrust
Other Paths
Tort/Crime Puzzle
Is the Common Law Efficient?
Property
• What is in the bundle? Application of Coaseian
analysis
– To whom is it worth most
– How can we make it easy to transfer if efficient to do so?
• What things should be property v commons—how
do you decide?
– Advantages of treating something as property
– Disadvantages
– Primitive societies
• Real property vs unreal property
– Fancy ownership, rebundling
– Vs own it or don’t
– Can still use contract, but not property
• Lead-in to Intellectual Property
• Intellectual property
– Patent and copyright are very different
– Why?
• Contract
– Why do we need contract? transaction over time, opportunism
• Might not—reputational enforcement
• Might
• And the issues with formal reputational enforcement—arbitration—are like those
with law.
– Why contract law—why not enforce as written?
– Case for freedom of contract
– Case against—limitations
• Third party—hit man
• Court knows better—paternallism
• Duress
– Complications—is there a contract, 1 party, etc.
– Filling blanks
• Like designing a contract
• Efficient risk bearing
• Efficient breach
– Defining fraud
• Family law—contract?
Property: Bundling Rights
• What goes in the bundle for land?
– Everything connected with?
• But some rights connect to two or more parcels
• Making noise, sending radio signals
• Pumping oil
– What goes together
• If I have right A does that make me
• The likely highest value owner of right B?
– Definition that lets you fix wrong answers
• At low transaction cost
• Consider the consequences of a right to enjoin
radio waves
• Or photons
Adjacency Problems
• Sounds etc.: common law of nuisance
– I want to be able to use my property
– But using it too noisily affects your property
• Vertical adjacency: Pennsylvania
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Surface estate
Mineral estate
Support estate
Old solution--low transaction cost rebundling
• Similar horizontal problem
– If my house slides into your pit
– You have violated my right of lateral support
– Under traditional common law
Common Pool problems
• We are sitting over a pool of oil
– Independent action means too many holes
– Pumped too fast
– Since I want to get the oil before you get it
• Unitization
– By a supermajority vote of landowners
– Oil becomes the joint property of all of them
• Problems
– Who defines the extent of the pool?
– How do we keep a majority from exploiting the
rest?
Property vs Commons
• When should something be property at all?
– Always? How about the English Language?
– Advantage:
• Incentives to produce
• Not to overuse (“tragedy of the commons”)
• To allocate properly
– Disadvantage?
• Costs of defining and enforcing property rights
• And transacting over them
• Consider primitive societies
– Private property in land makes sense for agriculture
– Perhaps not for hunting… but
– Private property in beasts being pursued?
• Consider the Internet
– Some people sell information, but many others
– Give it away
– Making most of the web an informational commons
• Consider “Fresh Choice” and similar restaurants
Examples of Problems
• Defining what you own
– Stack Island in the Mississippi
– Land along the Nile
– A patented idea
• Enforcing your rights
– The down side of private property in land
– What we owe to the dogs.
• Creating rights
– Homesteading law: Rent seeking problem
– Homesteading law: Bug or feature?
– Why didn’t they auction the land?
• The experiment was tried
• And faced serious enforcement problems
How big are the benefits?
• Incentive to produce
– How sensitive is output to price?
– Perhaps novels get written anyway?
– How many? Novelists have to eat too.
• Gain from efficient allocation
– For I.P. efficient allocation is to everyone
– For grain, on the other hand …
• Incentive (not) to consume
– All you can eat salad bars more common than
– All you can eat sushi or good steak
– Because the inefficiency from overconsumption is
less.
The internet as a Commons
• Passing on email
– I forward your packets
– You forward mine
– There isn’t a micropayment system available
• “Net neutrality”
– Larry Lessig’s case for what he calls a commons
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Actually a commodity
ISP charges, but …
Not according to what is in the bits
Or what they are going to be used for
– Are there good reasons not to let carriers charge
differently for carrying different stuff?
– Good reasons to let them?
Arguments pro and con
• Argument for:
– You and I, on opposite ends of the net
– Can do something new: VoIP, virtual surgery, …
– Without first clearing it with everyone in between
• Argument against
– High bandwidth uses
• Either slow everyone down or require more hardware
• One way of charging for bandwidth is by identifying high
bandwidth uses
• And either forbidding them or
• Charging more for them
– Some uses require higher quality
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Low latency (games)
High reliability (virtual surgery)
Providers would like to offer that quality--and charge for it
Which means those uses get priority over others
This is the argument re zoning
• If I need permission from my neighbors to do
anything nonstandard with my land
– Transaction costs make it hard to get
– Which prevents innovation. But …
• If I don’t, I can do things that
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Impose costs on my neighbors
Whether in ugly buildings, noise, risk, …
Moral externalities? Whorehouse, fur factory
As high bandwidth imposes costs on other users
And zoning can provide “high quality environment” for
those who value it.
• I haven’t yet persuaded Larry that he is against
zoning
– Which does by force of law
– What he doesn’t want to allow people to do by contract
Rebundling
• Real property can be rebundled
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Give an easement
Or a license
It runs with the land
Is binding on a future purchaser--usually
• Ordinary property can be restricted by contract
– But the contract is not binding on a future purchaser
– A constraint on the parties, not a change in the right
– Usually
• Why the difference?
Information problems?
• When I buy a computer
– I don’t know its history
– Can’t reasonably be bound by “easements”
• For instance, an obligation
• Not to try to resurrect erased data from it
• When I buy land
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Extensive system of title registration
Good reason for me to search
Easement or license may be observable from use of land
And if restriction is not findable may not bind
Benefits easier to pass than costs. Why?
Athenian law: Stone marker on land used as security for a loan
• Car?
– Past liens on it are binding on the purchaser?
– And show up on the title
• If information tech keeps getting better
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Perhaps we should allow rebundling
For everything
And provide appropriate systems of title registration?
Pen # 1739206 may only be used on …
How to rebundle anything
• Land can be rebundled, so …
– Put a non-land right into the bundle
– Then rebundle as desired
• Touch and concern doctrine in common law
– The bundle labeled ownership of this piece of land
– Can only contain rights that have something to do with
this piece of land
• Recent courts shift to a rule of
– Enforce if reasonable (efficient?)
– Otherwise don’t
– A shift from “rule designed to produce the efficient
outcome”
– To “Court decides whether the outcome is efficient.”
Intellectual Property
• Our intuitions are a lot less clear
– Some see it as the morally purest form of property
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I created this book/invention/song out of my own head
With no use of any material provided by anyone
So nobody else has any claim on it
It’s mine, mine, mine
– Others as a direct violation of property rights
• I own my copy of your book
• So should be able to use my Xerox machine to make
copies of it
– Economists perhaps as a substitute for a contract
that cannot be enforced
• The buyer of the book agrees not to make copies
• How about the person he sells it to?
• Back with the bundling issue
Puzzle: Why are Patent and Copyright so different?
• To promote the Progress of Science and
useful Arts, by securing for limited
Times to Authors and Inventors the
exclusive Right to their respective
Writings and Discoveries;
• Copyright
– Given for the asking--even without asking
– Lasts practically forever
• Patent
– Requires an elaborate process to get
– Must satisfy many conditions
– Lasts for a relatively short time
• Why the difference?